Could the US start sending its oil overseas?

Two men operate an oil rig in Illinois. Image copyright Getty Images

Americans enjoy some of the cheapest petrol prices in the world, due in large part to relatively low federal taxes on fuel and a four-decade-old ban on the export of crude petroleum.

But a US oil drilling boom has some people calling for the ban to be lifted so that US oil can flow onto the world market.

First time visitors to the United States are often shocked to see just how cheap petrol is in the US. While prices vary by region and state-by-state, the cost for a litre of petrol in Washington, DC, is about $0.93 (£0.57 ). Compare that to $2.07 in London, $2.11 in Paris, $2.15 in Hong Kong, $1.53 in Tokyo and $1.39 in Rio de Janeiro, according to the research and consulting firm AIRINC.

All of this makes cross-country road trips in the US quite a bargain, relatively speaking.

The current policy dates back to the Arab oil embargo of 1973-1974, when Opec countries reduced production to punish the US for giving aid to Israel during the Yom Kippur War. In order to protect itself from future volatility, the US instituted the export ban (exceptions were made for oil from Alaska and parts of California).

The ban's opponents say that leaving it in place could stifle future growth in the booming US oil industry by driving up domestic supply, lowering costs.

Jake Dweck, a Washington-based lawyer who is campaigning against the ban, told NPR that "the results would be reduced production, possibly shutting productions over time and reduced economic activity for the US economy as a whole".

Lifting the ban would allow US producers to sell their crude oil on global markets, providing a greater incentive to develop new technologies, seek out new sources of petroleum and boost the economy.

"The benefits are huge," writes Robert J Samuelson in the Washington Post. "Surging US production has created thousands of jobs, helped stabilise global oil markets and curbed our import dependence."

Ironically, much of the support for the present policy comes from oil refiners in the United States who are not covered by the ban. If it is lifted, they would be exposed to competition from cheaper overseas refining firms.

Environmentalists are also voicing long-running worries about the health and climate-change effects of the increased drilling a change could prompt.

"Only 20% to 25% percent of global proven oil reserves can be consumed between now and 2050 if we are to have an 80% chance of avoiding devastating climatic changes that would destroy the global economy," writes Oilchange International's Lorne Stockman in an October 2013 report. "Therefore, allowing US crude oil exports specifically to enable exploitation of oil that is currently not included in those reserves is a recipe for disaster. We are in a hole, and we need to stop digging."

Public-safety issues are also a concern. Trains, often used to transport oil, have shown a penchant for wrecking and blowing up in recent years.

Some skeptics warn that the impact that lifting the ban will have on US petrol prices is overestimated. Although it may be less expensive to refine oil abroad, the ban could raise the price of unrefined crude oil domestically.

"Traditionally, US crude sells for several dollars per barrel cheaper than does oil on the world market," Politico's Elana Schor writes. "Opponents fear that allowing exports would make the domestic oil price rise, triggering a similar spike for gasoline at the pump."

Timothy Noah writes on MSNBC.com that all this makes lifting the ban right now an unnecessary risk.

"Policymakers often have to choose between addressing climate change and acting to lower the price of oil," he says. "In this instance, though, favouring environmental concerns by maintaining the crude oil export ban would likely keep oil prices low in the United States, at least for now."

The debate seems to be graduating from oil industry squabbling to the broader political arena and is gaining political traction as November's mid-term congressional elections approach. Republicans, who could win a majority in the Senate and thus control both houses of Congress, are split on the issue.

While they are the party that traditionally champions free markets and increased drilling, Republicans may fear that the blame for any spikes in oil prices could be laid at their feet.

Democrats aren't united on the issue, either. Hoping to squeak by with just enough seats to maintain their majority in the Senate, Democrats are loath to alienate their environmentalist supporters.

Some prominent liberals have come out in favour of ending the ban, however.

"I believe that the question of whether the United States should have a substantially more permissive policy with respect to the export of crude oil and with respect to the export of natural gas is easy," President Barack Obama's former chief economic aide, Larry Summers said at a Brookings Institution event. "There is no environmental argument for a policy that distinguishes between oil produced in the United States for domestic consumption and oil produced in the United States for foreign consumption."

While prices at American pumps are relatively low, a price spike can quickly become a highly contentious political issue - as was the case prior to the 2008 and 2012 presidential elections.

Despite recent turmoil in oil-producing regions around the world, Americans have enjoyed relatively stable prices at the filling stations.

Members of Congress, currently on recess to campaign in their home districts, probably aren't hearing much from their constituents on the issue right now. One wrong step, however, and that would certainly change.

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